America's Tragic Future In One Parabolic Chart

When it comes to forecasting the long-term trajectory of the US economy, things usually get very fuzzy some time after 2020 because, as even the most hardened optimists, the "impartial" Congressional Budget Office have recently admitted, America has at best 3-4 years before everything falls apart due to the unsustainable demographic crunch that will wallop the US entitlement state as demographics suddenly becomes a four letter word. Beyond that, not even the CBO dares to plot a straight line as to what happens should America not get its fiscal house in order.

Which is why were were very surprised to see none other than Morgan Stanley's David Greenlaw and Deutsche Bank's David Hooper release a paper (whose views do "not necessarily reflect those of the institutions with which they are affiliated") titled "Crunch Time: Fiscal Crises and the Role of Monetary Policy" which is a must read for everyone interested in what very likely will happen to the US as ever more power is handed over by the country's now terminally malfunctioning fiscal and legislative apparatus to the monetary policy vehicle controlled by the US financial oligarchy.

Since we know that most readers are pressed for time, we will cut to the chase: the following chart shows what according to the authors' own simulation of the US economy, and not that of the CBO, rates on the 10 Year will look like through 2037. The second chart shows what US debt-to-GDP will be for the next two and a half decades.

The charts need no commentary. Parabola #1 showing the yield on the 10 Year under the authors' simulation:

And Parabola #2 showing total US debt/GDP:

For those who request at least a little commentary, here it is:

[W]e have assumed the U.S. current account deficit holds at 2.5% of GDP-- a level that matches the best result seen in the past decade and is slightly narrower than the 2.7% of GDP recorded in 2012. If, instead, we assume that the current account deficit reverted to the 3.7% of GDP average seen over the prior five years, then the projected debt burden would reach 180% of GDP in 2037.

We can also examine a scenario in which policy actions and economic outcomes produce a less favorable path for the primary budget deficit (using our baseline current account deficit assumption of 2.5% of GDP). For example, suppose that the looming budget sequester scheduled to occur on March 1 is cancelled and that the steady-state unemployment rate is assumed to be 6% (as opposed to the 5.25% as assumed by CBO). In this case (which we refer to as Simulation II), the budget deficit would be quite a bit higher than in the initial scenario. The debt/GDP ratio would rise much more rapidly, hitting 304% of GDP by 2037 (Figure 3.13) and bond yields would skyrocket, eventually getting above 25% (see Figure 3.14).

We should emphasize that we are not presenting these alternative simulations as more realistic forecasts of what the U.S. experience will actually be. In a country like the United States, the debt premium presumably would arise from inflation fears rather than concerns about outright default. And if we are talking about a higher inflation rate, forecasts of nominal GDP should be adjusted as well. Instead, we view these simulations as illustrating the extent to which the path implied by baseline CBO projections could quickly become much more difficult to manage than some policy-makers may be assuming-- something dramatic will need to change well before U.S. interest rates reach double-digit rates

Our main conclusion is that higher debt levels can have a significant impact on the interest rate path and that feedback effects of higher rates on the level of indebtedness can lead to a more dramatic deterioration in long-run debt sustainability in the United States than is captured in official baseline estimates. Figure

Putting some numbers to the forecast by Greenlaw and Hooper, and assuming a 1.5% CAGR for GDP, which in the new structurally slower normal is quite generous, we get $23 trillion in US GDP by 2037, $70 trillion in debt, and a blended cash interest expense that is over 75% of total GDP.

Ultra Short ETFs are short term trading instruments. Long term holdings of these things are guaranteed to lose money, no matter what the direction of the underlying asset. The leverage that puts the "ultra" in the short costs money. There is no free lunch.

What's really sad is that those charts look a little too optimistic to me. 10-yr yields at 5% in 2017? LOL, I don't think it'll take near that long. 2015 at the latest maybe? Then again, it's just a guess, and my guess on my part, but my guess is as good as theirs. I'm surprised that things have held up this long and will be absolutely shocked if we make it to 2014 without some sort of crisis - a real one, not an Oblamo manufactured one.

Well now, that expains the motivation of the NWO. The real chart is Population v Gold Supply. That is what has those fuckers all nervous. Fractional reserve banking is only a temporary fix until they can kill off enough people to bring the population back in line with gold supply BEFORE the system collapses.

Knowing that now, I will feel so much better eating Pemmican in my bunker.

Personally I'm convinced Bush and his cronies and Mossad perpetrated 9-11. In fact I think OBL is/was a USA operative. Israel and usa are the world's biggest terrorists.

But, let's suppose OBL was not a USA operative (i.e. a CIA employee). Instead of reading the ramblings of a Jew re. terrorism, I suggest rather reading OBL's 1996 stated intentions against the usa in his declaration of war. In it, he clearly states that a 9-11 type attack wouuld absolutely positively with no doubt entangle the usa in a war in the "graveyard of empires," aka Afghanistan. Earth to ideeots: we've been in that sheet hole for about eleven years. Those two wars (even daddy bush was not stupid enough to stay there) cost us only about $2T and counting, and have created endless numbers of enemies from now to as far as you can see over the horizon.

Al Qaeda success rate: 100%

If you can't see that this whole program is going exactly like they planned, get new glasses. If you like Mexico, you'll love the usa in about 15 years.

The "people who matter", the ones whose task it is to maintain the system, still have options. Its true the Fed can't remain the primary buyer of long treasury paper forever. And, if market rates go up while they sit on their mountain of already purchased long paper they would face the choice of holding to maturity.......which would be a problem for them.........or taking a major loss to liquidate. That latter prospect would have the interesting effect of destroying some of the funny money the Fed has created to support US government debt.

But, the Fed still has the option of moving toward the very shortest end of the yield curve and dumping tons in there and holding to maturity. The effect would be to create a startlingly steep yield curve but for those charged with maintaining the status quo it would give the US government some additional breathing room in terms of suppressing interest rates while the debt problem is addressed.

The real problem is that the Fed can wait forever hoping its partner in crime, the US government, will get its fiscal house in order and in a more harmonious relationship to monetary policy. Problem is that will never happen. And eventually when all the fixes have been tried the system will break down. But do give the engineers of our modern monetary policy some credit. They can be very creative in figuring out how to kick the can down the road for much longer periods of time than anyone would think possible.

I keep saying it but nobody I know listens. We have consumed, spent, used up REAL wealth over the last 40 years. It's gone. We borrowed REAL wealth from the future and we pissed it away on all manner of stuff. People my age will have to work longer which clogs up the employment line. Young people are FUCKED...and they aren't gonna like it when they figure out what's happened, and what's gonna happen in their future.

Young people are screwed in so many ways. Not only do they have debt that they can never pay off and likely interest payments that will consume most of their earnings, but they have a social entitlement system in place that will have a suction rivalling the nearest black hole. On top of that they have been indoctrinated by an eduucation system that has convinced the majority of them that they are entitled to a good job and worldly benefits without really having to work too hard. And worst of all they have a hundred million or so of us mean old farts that just won't die and keep dragging out of bed to suck up the few jobs left.

My friend who owns a gold/silver gun shop explained something to me last week that I want to pass along for what its worth. there has been lots of speculation here on ZH and elsewhere about why the Feds are stocking up on so much ammo. My friend says its simple - the Feds place a $25 million order for ammo at every ammo mfr, which naturally puts them in the front of the line for delivery. Then when that order is delivered they immediately put in another order, which puts them back at the front of the line. That way they can limit the availability of key supplies of ammo without having to pass any messy public legislation - they just buy it up and store it. No sinister conspiracy about arming every G-5 postal worker with 2000 rounds of high velocity ammo - its just about limiting availability in the most subtle way using their unlimited supply of money. Makes sense to me.

Yeah, well...given the # of guns and amount of ammunition already in the hands of the People, esp on the Right, I'd say the ZOG got into this game a tad late. In fact private sales of ammo continue to exceed the gubmint purchases by a large multiple.

When Civil War II reaches the point of entire states fragmenting or seceeding, National Guard units will go with them. Marines are already close to mutiny: cf. the Inaugural Parade removal of firing mechanisms from their rifles. Marine/Nat Guard air units will have no trouble shooting down Federal drones. ZOG is way, way less powerful than many of us seem to think. In fact it's downright brittle.

Yeah, but the Gov't is only buying very specific types of rounds that fit their service pistols. Every other type of ammo should be unfettered by Gov't buying. I prefer the dual explanation - they are buying ammo for training, but they are also preparing for something at the same time by buying 10x the ammo they need for training.

Both graphs show their divergence at about 2018 . I am too busy to read their full reports, so maybe the authors explain this, but I wonder what magical happening occurs then. Will unicorns suddenly stop shitting rainbow skittles? Will sanity suddenly make an appearance from out of nowhere? Is a planned stochastic event being cleverly and subtly forecast by the eminently altruistic folks at MS and DB? Really, these graphs raise more questions than they answer.

Can't quite work out what future you are planning for that you need so much ammunition. Who are you going to be shooting? Members of the US military? Foreign invaders? Either way you'll lose and end up dead. Or perhaps you're planning on a total breakdown of society in which you'll all be shooting each other. Once again, in the long run, you'll all lose and probably end up dead no matter how well prepared you are. So are you just playing out some sci-fi fantasy world, one that has you as the good guy? You'll only need a few bullets, for your family because when the barbarians are at the door, you're done for. Better to give up this fantasy of surviving the dark ages and instead focus on improving the lot of everyone in the end game.

Hording is a response to a threat of limiting supply. It may not be completely rational but gaged against the "rational" acts of our government might not be so insane. People are feeling threatened by our economy, our government, religious extremism, organized and random crime and a full laundry list of issues. The constant threat of our government to limit the only pphysical means of self defense should be pretty obvious. As to quantity of ammo, speaking for myself, it is a self gratifying response. Kind of a rebellion against TPTB.

Sounds very much like satisfaction at having done "something", even if that something is of little to no consequence.

And THAT sounds exactly like the typical response by typical statists to real world problems that are usually of their own creation --- with the caveat that "that something" virtually always has strongly negative consequences, for freedom at the very least.

As opposed to your approach to dealing with problems of your own making, which is to do nothing, deny there's a problem at all, then post fairytales about invisible hands, but what else would one expect from a group of people who are clamoring for the freedom to be poisoned and cheated.

No silly, I have all the brass,lead and contempory arms for when I come with my band of like minded raiders - to take your shit and rape your women. It's mindless cunts like you who'll be the prey one way or another. Quisling pieces of shit will be exterminated.

Projections from international bankers are more like proposals: proposals where the future is laid out to fit what the bankers can use for their advantage.

Rather than a prediction, it is a plan. And the reason it’s put together is to help the central bank follow a road map from which in the end the financial sector profits from the developments. It would be almost laughable that these bankers could predict what will happen over the next two quarters, let alone the next quarter of a century.

Who can possibly pay any attention to this other than believers in central bank propaganda?

The U.S. economy and the Fed can no longer continue to co-exist. As Gary North says: “Keynesian economics is unsound, fiat money is unsound, massive federal debt is unsound, and there will be a day of reckoning. On that day, the existing establishments will go on the defensive. More than this: they are already on the defensive. That is something new. The crisis of 2008/9 was the tipping point.”

And if Keynesianism is theoretically inaccurate? Says North: “Then the power elite has created an economic system which is like a kind of bomb with a lit fuse. If the Keynesian system is analytically accurate, the rigged game of wealth-redistribution to the largest banks can go on indefinitely.” But, says North, “the Keynesian system is inaccurate.

“There is going to be a day of reckoning. On that day of reckoning, the entire system of leverage that the conspirators have used to benefit themselves will be shaken to the core.”

Maybe the economy's sobered him up. Anyway, who can disagree that what’s transpiring is “unsound”?

The word unsound means that it doesn’t last; it means it fails. North, in his paper “Reversal of Fortune: Why the Power Elite Will Lose Power,” did a good job proving that their worldview and use of Keynesianism is unsound. These power elites have lost their leverage; they are at that point where they can’t make it happen anymore. Look at the EU today under Stanley Fischer’s other Keynesian trainee, European Central Bank President Mario Draghi.

We’re dealing with sums that are beyond their comprehension. When you factor in all these derivatives, mixed up like spaghetti with figures beyond even the value of the entire nation and the earth, it’s make believe. And make believe always comes to naught.

“The centralized levers of federal government power over the economy offer tremendous opportunities for insiders to get very rich. They can extend their private power through government privilege. They can and do leverage the existing political and regulatory system, which is a centralized economic system, and in doing so, they maintain their position.”

North again. But, as he says, they are now leveraged out -- financially, intellectually, politically and institutionally;while at the same time they have “little understanding of economic theory” and most of all almost no understanding of “social cause-and-effect.”

And two of those social cause-and-effects are that Main Street's in total economic disrepair and there’s an American buying a gun every 1.5 seconds.

Having intimate knowledge of the absolutely frantic rush to remedy that situation behind the scenes - let be the one to tell you that you really have no fucking clue as to the bullet that was narrowly dodged.

i've lived long enough to see the leadership of this country breaking laws out in the open that they would have gone to jail for twenty years ago. i see the POTUS murdering children with his drones, taking financial kickbacks, making racially charged suggestions. his attorney general who is really nothing more than the gangsters lawyer. and the justification for this is that he is less corrupt and venal than the last president. he presents a false view of the world, with enthusiasm and moral authority, and his adoring public supports him. that of course is just one branch.

"Kill for the thrill. (assassin) Some people think newspapersexaggerate juvenile crime. All that is defined mostly to thelarge cities, juvenile delinquency is underlined. Thus parentsthink something is going wrong with the environment. Adultscreate the world, children live it. Juvenile delinquency isalways rooted in adult delinquency. And in this process, parentsplay the key role when children grow up among adults who refuseto recognize anything that is fine and good, or worthy ofrespect."

Me too. Just had a ZeroHedge Fight Club birthday. Never knew Chuck Palahniuk & I had something in common. Looking back, cannot believe how lucky to apart of this ZH community. Seems like only yesterday when Atomizer was climbing a chain link fence and diving back into the crowd.

Before Hemingway made his fortune as a novelist,he was a journalist with the Toronto Star among other publications.He wrote of crossing over the border into Germany during the roaring hyper-inflation,and his ability if he wanted to"purchase the entire contents of a sporting goods store for 5 bucks". Hemingway was a world-class bullshitter but this episode rings true.

There is an interesting behavioral condition known as cognitive dissonance (tunnel vision,being in a state of denial,etc.). It should be interesting when the shelves are bare,the power and phone are shut off,and the Atms won't work. Greece here we come.....

For those of you who are amenable to evidence, why not look into just who heads/chairs pretty much all of the federal agencies pertaining to banking/finance - cbo, fdic, the fed, sec, formerly and often the ira, cftc, treasury, office of management and budget, council of economic advisors, national economic council, bureau of economic analysis and on and on...

This is leaving aside the breathtaking over-representation of Likudnik, neocon Jews in the Bush Pentagon, DHS and Whitehouse

Then look into just who it was supporting a young, unaccomplished senator from Illinois.

Or don't - and hope for the very best when Rahm Emanuel runs for President. Anyone thinking he's loyal to Israel and the bankers first is just an "anti-semite," right, trolls?

Sometimes it's a struggle to see what is right in front of one's eyes.

Next you'll be telling me there's something wrong with a "race" of people who grew up being taught from their holiest of all holy books the Talmud, they came from golden sperm that is the only magic fairy dust sperm in the world that god loves, and that all other races of people are mongrels (goyim).

Or some crazy crap like the jews made shite loads of money from black slaves and white slaves in the usa. Or that they ran the mafia through jew Meyer Lansky.

Respected analyst Meredith Whitney made an armageddon forecast on Muni bonds too...and that proved to be very wrong.....States govt's proved not to be so mindless....and made adjustments when markets put pressure on them. Ms. Whitney mostly hurried the markets pressure on the govts.

its called stagflation...negative growth with inflation..everybody beats any US manufacturer, throwing people out of work, there is no growth, the dollar falls substantially, but prices compete with overseas prices and hence as the dollar falls, prices go up...= inflation.

all we have is the "race to debase" and the classical hostage situation where each country (hostage) tells the kidnapper (inflation gunman) to shoot the other hostage. this is international politics and how shitfer brains morons like the imf's lagarde run around telling the kindappers and hostages to keep calm, because they are bringing sandwiches (robbed from a hostages back pack).

The whole dichotomy about "values" and wanting to "live in the instance"; 'cos our current civilization is all about the latter at the expense of the former, as the consumerist culture has developed and pervaded all.

It is this that feeds the mindset of the "ferocious beast of capitalism gone mad".

And its proponents, part of the INTRICATE Matrix in government and private circles; a two headed crony elite that develops in ALL imperial constructs, whose ideological posturings animate the sterile debate in society reflected in this thread; aka "statism" vs "free enterprise". (Remember Populares vs Optimates in the demise of Republican ROme).

This is just one instance that stirred up a debate about what the trade offs are between living "successfully" and living "honestly" and we all feel at ZH something is really wrong with first world about our root values and how easy it is in today's world to forget them; notwithstanding that as a generation we have been programmed to celebrate "Woodstockian here and now pop culture and all that goes with it!" These charts show that momentum built over 45 years of PAx Americana rule.

Just to reverberate on this theme : here is an article that tries to define the time line about how US culture morphed in post WWI from a culture of "NEEDS" to a culture of "DESIRES" and how the second was fanned by the corporate culture of those "who built America! "

Interesting reading and IMO a time line flag to what needs to be put right, by the coming generations in terms of values and mindsets. 'Cos this trajectory is unsustainable now that the whole world has bought into this, in materialist LUST and third world dust. We are now constrained by physical asymptotes that this debt frenzy has exacerbated : oil, water, food, population, RMs, ecologocial decay; you name it and there's no getting away.

Living frugally will be very "in". We always learn our lessons the hard way.

But before that we have to face the upcoming tsunami of structural debt adjustment and consequences; one way or another, in first world and its surrogate outposts.

The next Copernician revolution is under way; tipping times and decadent chimes.

I find it hard to believe that 10 year rates will soar. The FED, in coordination with other CBs will print money and buy every bond in the world in order to keep rates low. The rates will not rise (except for whatever the FED deems as a "manageable" rise). Of course, printing and buying trilllions and trillions will cuase all kinds of terrible side effects (and the bond/stock mmarkets will break) but that will not stop the FED. I wouldn't bet on the 10 year reates rising very far. Not only does the FED (and other CBs) believe they can direct "the markets" (which is dangerous), they are acting with enough coordination and volume (of fiat), with governments of the world cooperating (because politicians always take the easy way out), that they are running "the markets". Bond vigilantes are irrelevant.

Not sure why your point is discussed so infrequently. Jim Sinclair has been saying this for some time. If rates rise, the govt is immediately and obviously insolvent, resulting in a massive loss of confidence. Housing crashes and all sorts of other problems arise. Essentially, the whole system crashes.

Do people really think the Fed will lose control? Will they do it deliberately? The scenario seems half baked without a description of the context.

no no no....you don't get it...the government is already "insolvent" and the Fed is working through the equivalent of Chapter 11.

we are in a transition to a "right sizing" of the government when some guru will surface who will cut spending will cut spending across all welfare by 40% from 3.6 trillion to 2.2 trillion, raise taxes by 20% from 2.3 trillion to 2.7 trillion and repay the 16 trillion of debt over the next 32 years, before accumulating the surpluses required to (once again) increase the benefits to voters from accumulated capital, rather than accumulated debt.

if you believe that we have seen a fiscal cliff or austerity or that sequestration is in any way "tough", you are dreaming.

TPTB can either "manage" the transition to a "fully funded by assets generating the free cash flow that pays for government spending" model, or they can oversee total collapse and houses being burned for firewood in winter and a huge increase in meat and vegetable "rustling".

Was taliking about perceptions and confidence. Right now, all still functions in govt and all can still be purchased with dollars. The name of the game is perception.. USD are already losing standing worldwide. If rates go up through the roof, the tax base will not be enough to pay the interest.

Any gradualism like shown in the above charts is, IMO, unrealistic. Debt is being piled on like there is no tomorrow, probably because there is no tomorrow for the current system. A sudden change to an alternative system is more likely because smooth transitions out of the current system are becoming less and less possible as debt is piled higher.

The two charts are pointless at predicting any sort of future for American finances. They reflect "Simulation II" of the authors' report which is essentially a worst-case scenario if all things remain equal.

But this scenario will not happen because it is impossible to sustain and therefore won't happen. Collapse of the Federal Govt would happen long before this scenario materialised.

Action will be taken, or will occur, to prevent it. Whether that is a governmental move towards a complete totalitarian command economy (in which peoples' wages are diverted and paid via the IRS and what's left after taxation is forwarded to the employee to live on) or the govt will default on its debts (with unknown consequences) ...or whatever. Many options exist. The point is that something will prevent this scenario from happening. That makes the charts nothing more than a scare story showing a financial trajectory if all things continue along the current path. But they won't.

I'm sure there are various scenarios that might arise, given the projected trajectory portrayed in those charts.

But that blue (purple?) trajectory will not happen because it is unsustainable even for a short period. I mean, can anyone honestly imagine US 10yr yields ever rising to 25%? No. The federal govt would have collapsed long before that happened, not least because of the implications to other domestic interest rates.

One of the alternative actions will arise _or_ will be forced. A useful debate, given the projected trajectory of those charts, is about *what* actions will be taken to prevent it.

My (tongue-in-cheek) suggestion of a totalitarian command economy is one possibility and it isn't unlike your idea of a planned Marxist collapse of capitalism and dumping of the constitution. WWIII (or something close to it) used as a smokescreen to default on US sovereign debt is another and more likely IMHO. Although a mixture of both is probably more likely.

The easiest solution for the Government is to change the system to a pure MMT one. This can be done either by funding the government with seigniorage (trillion dollar coins), or by eliminating government borrowing and having US $ come into existence by the very act of deficit spending. Private banks would have to be abolished (except as Gov't contractors) as well under a MMT system, but we are already almost there today, with 95% of all mortgages made by FHA, Fannie, and Freddie.

Given the apparent reluctance by governments to reduce deficit spending and accumulation of ever higher sovereign debts, despite the obvious crises, something in my water tells me that a new something is already being worked on to replace the current system, but isn't yet ready to implement. What that something is, is open to speculation. Perhaps it's MMT, perhaps it's WWIII or perhaps it's China becoming the global reserve currency etc. Either way, it will probably involve a Big Reset of current sovereign debts which we all know are both unsustainable and unrepayable. And IMHO it will probably include a shift towards a much more socialist command economy.

Or the Government could change the financial system to a pure MMT one, starting by minting trillion dollar coins. Government "debt" requiring interest payments would not exist at all under this option.

You may be right. But even this scenario is more than enough to ensure that it will never happen. Somewhere along that blue line the whole political/financial systems will implode _or_ pre-emptive actions will be taken to head it off. Since political elites have their own survival as No.1 priority, the latter course is my guess.

I find it difficult to take any chart that plots decades down the road seriously, or to even be concerned with what that chart predicts because I know for myself and everybody I work with, we all head home on Friday wondering if we are still going to have jobs on Monday. because we know that's how it's going to happen, you show up and the doors are locked, no warning, just somebody there to let you in to grab your personal effects and that's it.

one of the things I love about ZH is the constant reminders, via data and chart updates and well thought out pieces and analysis where the tylers and there guest posters employ critical thinking, of the now, what is really happening today.

most of the time when I get into a discussion with one of the many propaganda addled sheeple regarding the state of our economy they inevitably fall back to the argument that a collapse of the system will not happen because "it hasn't happened yet".

I beg to differ. it may not be occurring in free fall speed like the WTC on 9/11 but all one needs to do is shake of the normalcy bias and take a look around to realize that the collapse is under way, and our society, our culture is coming unglued even now.

I can guarantee you if you took somebody from 20 yrs ago and dropped them into today, they probably wouldn't even recognize the country you dropped them into. we are the frog in the pot, and the water has turned from warm to boiling.

these charts show the end of the road decades from now, but is that not a hopeium induced delusion in and of itself? what road is the can being kicked down today? more likely the can is bouncing down the side of the cliff, catching the ledges as it tumbles, slowing the fall, but on it's way to the bottom none the less.

I contend that 95% of us were in the world you shrink from now 20 years ago, and it's only the remaining 5% who are surprised at how things have gone since then as the blinders of the debt-based economy are peeled back to reveal the ugly underneath the rest of us have been dealing with all along.